Carrots and Sticks: Pay, Supervision and Turnover

30 Pages Posted: 14 Dec 2010

See all articles by Jonathan S. Leonard

Jonathan S. Leonard

University of California, Berkeley - Finance Group; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 1987

Abstract

Large and persistent differences across industries in wages paid for given occupations have commonly been observed. Recently, the efficiency wage model (EWM) has been advanced as an explanation for these wage differentials. The shirking version of the EWM assumes a trade-off between self-supervision and external supervision. The turnover version assumes turnover is costly to the firm. Variation across firms in the cost of monitoring/shirking or turnover then are hypothesized to account for wage variation across firms for homogeneous workers. This paper presents empirical evidence of the trade-off of wage premiums for supervisory intensity and turnover. A new sample of 200 firms in one sector in one state in 1982 is analyzed. Little evidence is found to support either version of EWM. The substantial variation in wages for narrowly defined occupations across firms remains largely unexplained.

Suggested Citation

Leonard, Jonathan S., Carrots and Sticks: Pay, Supervision and Turnover (March 1987). NBER Working Paper No. w2176. Available at SSRN: https://ssrn.com/abstract=1725113

Jonathan S. Leonard (Contact Author)

University of California, Berkeley - Finance Group ( email )

Haas School of Business
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Berkeley, CA 94720
United States
510-642-7048 (Phone)

National Bureau of Economic Research (NBER)

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